The Financial Crisis Inquiry Report docx

[...]... as in the precrisis period) Almost all countries increased their “financial depth” postcrisis—that is, deposits flowed into the banking systems, during and as they were repaired The experience with bank credit postcrisis was much more varied; in some cases it grew, while in others it shrank (suggesting that government debt rose rather than loans to private borrowers, partly because of the postcrisis... crises; the new element was how many of these crises involved, if not originated in, banking and financial sector crises This pattern contrasts with most of the crises of the early 1980s, which largely reflected the inability of governments to roll over the external debt of the public sector.7 In many of the recent cases, the banking and financial crises preceded the currency crises.8 In the crises of the. .. closure of banks and other intermediaries probably did reduce the availability of credit to some borrowers   notably Indonesia and the Dominican Republic, lender-of-last-resort support far exceeded the precrisis capital of banks The 1990s runs on the banks and the support for the financial sector typically turned into runs on the currency and the loss of international reserves The runs on banks... of the bad loans proved false—typically the recovery was 20 percent or less of face value The governments eventually had to put their debt into the banks to replace the debt of the asset management company The implications of this process for banking systems postcrisis are discussed below The Macroeconomic Recovery: Low Inflation and the Return of Growth Inflation remained surprisingly low despite the. .. spreads Perhaps the best test of the success of measures taken so far is how the market, specifically bond investors, has perceived them By this test, the verdict, at least at the time this paper was presented, looked good: for virtually all of the countries that experienced a crisis within the last decade, interest rates relative to U.S treasury bond rates have fallen significantly since the time they were... digits The crisis in the Dominican Republic that began in 2003 was associated with an even sharper rise in inflation, but after July 2004 inflation was largely halted by a sharp appreciation of the peso 14 Banking data from the International Monetary Fund’s International Financial Statistics typically do not show the rise in government debt from the crisis until the government actually puts its debt into the. .. effects in the rest of the region Furthermore, some of the countries that have been buying dol-   lars have also had difficulty sterilizing the dollar inflows, which creates a danger of inflation The financial sector, and the banking system in particular, has been at the heart of the financial crises discussed in this volume To what extent have countries since introduced reforms to address the weaknesses... timing, nature, and scale of these recapitalizations The authors examine the postcrisis performance of thirty-eight countries that have suffered crises (a few more than once) since 1994 Again, despite the country variations, some interesting common features stand out On average, GDP growth in the three years following the crisis was lower than in the three years preceding it; the same was true with inflation... The banks thus found themselves with insufficient assets to back the deposits that individuals and firms held in them At the same time, household assets were relatively liquid because the shortage of goods in centrally planned economies left them with little alternative other than to hold their meager income as bank deposits or buy for-   eign exchange The new governments therefore faced a... Japan The authors suggest that in the European countries, the financial sectors were relatively much smaller to begin with, so they suffered and caused less damage than in countries where banks played a more central role in the economy Although the economies in the region during the transition period have performed very differently, the authors suggest that certain common conclusions can be drawn from their . easing by the Federal Reserve Board in the United States, emergency lending to the countries in the region by the International Monetary Fund (IMF) and other international institutions, the concerted rollover. rates helped the working of the financial system after the crises in all the countries. In terms of growth, the postcrisis experiences have differed between (and within) regions. The East Asian.  its crisis, in part because of the political turmoil surrounding the end of the Suharto regime and realignment of the political economy as the country developed a democratic government. The Latin